a. Explain the impact of the following events on the money market equilibrium and equilibrium interest rates: i. Decrease in the minimum reserve requirement ratio. ii. Central Bank buys government bonds in an open market operation iii. Invention of credit cards. b. Define and explain "the money multiplier" in your own words. If the money multiplier = 2.2 and the central bank increases the monatery base by 10 million TL, what will be the total increase in the quantity of money in the economy? c. Define and explain "the quantity theory of money" in your own words.

a. Explain the impact of the following events on the money market equilibrium and equilibrium interest rates: i. Decrease in the minimum reserve requirement ratio. ii. Central Bank buys government bonds in an open market operation iii. Invention of credit cards. b. Define and explain "the money multiplier" in your own words. If the money multiplier = 2.2 and the central bank increases the monatery base by 10 million TL, what will be the total increase in the quantity of money in the economy? c. Define and explain "the quantity theory of money" in your own words.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $300. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. A higher reserve requirement is associated with a __larger, smaller__money supply.Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to ____buy / sell_$___________worth of U.S. government bonds. Now, suppose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic conditions. Specifically, banks increase the percentage of deposits held as reserves from 10% to 25%. This increase in the reserve…